In general, financial accounting applications assist users in tracking financial transactions. The financial transactions typically span multiple financial accounts. For example, a user may have a credit card account, a banking account, a savings account, or another account used to track financial transactions. The financial accounting application typically includes functionality to collate the financial transaction data to generate reports. The users may use the reports, for example, to monitor the status of a user's business or personal finances, create a tax return for submitting to the Internal Revenue Service, and provide information to co-owners and investors.
Often owners of small businesses co-mingle personal and business income and expenses in one or more financial accounts. For example, consider a scenario in which an individual operates a costume jewelry business from their house in order to supplement their regular income. In addition to standard personal income and expenses, the individual may use their personal credit card to purchase the raw goods (e.g., beads, rhinestones, thread, clasps, etc.) for creating the costume jewelry and their personal banking account to deposit income received from selling the costume jewelry. Thus, each financial account of the user may represent both business income and expenses and personal income and expenses.
In order to perform the accounting for the small business when finances are co-mingled, the owner may manually separate the personal and business income and expenses, using the financial accounting application. Once the separation is complete, the owner may perform standard accounting operations to generate reports.